Cardano Stablecoin DJED Depegs as Reserve Ratio Falls, Causing Trouble

The COTI-issued stablecoin Djed has been delegated across all of Cardano’s decentralized exchanges as the token’s reserve ratio recently fell below par.

launched on the mainnet in January 2023, the Cardano algorithmic stablecoin Djed is already causing issues related to de-pegging and unminting for its users, The Cardano Times (TCT) revealed.

Djed Depegs as the reserve ratio falls

According to Cardano’s free media network, Djed’s reserve ratio has fallen below the percentage needed to keep the algorithm-based stablecoin stable.

In particular, Djed’s reserve ratio was designed to stay in the 400% to 800% range to constantly maintain parity with a dollar.

However, the reserve ratio of the Cardano stablecoin has dropped to 346% according to a snapshot shared by Wednesday. TCT. As of July 4, the base reserve had approximately 39,343,556 ADA, which is equivalent to 11,555,202 DJED tokens.

DJED Reservation
The Cardano times

This has resulted in users’ inability to undo their tokens through the Djed protocol. The stablecoin, which has the DAG-based Layer-1 protocol COTI as its official issuer, has been disconnected from all Cardano decentralized exchanges.

The tweet revealed: “DJED, the stablecoin issued by Coti, has failed to maintain a reserve ratio between 400-800%, making it unlovable via the DJED protocol to users, leading to consistent de-pegging across all Cardano DEXs.”

To further support this, The Cardano Times shared a chart showing Djed’s trading history in June, noting that users cannot buy the stablecoin for $1.

The Cardano times

Cardano community responds

This development caused a slight uproar in the Cardano community. While some users commented that Coti failed to ensure sufficient liquidity for the stablecoin, others claimed that Djed is working as intended.

Reply to the user who submitted that the stablecoin has “completely failed” with regard to liquidity, TCT clarified that Djed only disconnected all Cardano DEXs and not on the protocol itself.

While the algorithmic stablecoin still maintains a $1.00 price on its protocol via its burn mechanism, TCT noted that at the time of the announcement, it was impossible to buy the token for $1 on the open market.

On the other hand, EMURGO Academy Community Lead Jonah Koch noted that the stablecoin works as designed. He on suggested ways to help Djed keep his position. He added that the stablecoin issuer should stop minting the reserve token SHEN to pay COTI holders. Koch emphasized that SHEN should only be beaten to keep Djed’s clutch.

It’s worth noting that this development comes shortly after Cardano’s overcollateralized dollar-pegged stablecoin Djed became available for lending and borrowing on Liqwid.

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disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may contain the personal views of the author and do not reflect the views of The Crypto Basic. Readers are encouraged to research thoroughly before making investment decisions. The Crypto Basic is not responsible for any financial losses.


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